All of French Company Law: ordinary law of companies and specific regime for different types of companies

Company Law (en cours)

As in joint stock companies, the significant freedom of action granted to management bodies is counterbalanced by the control of agreements concluded with the company, in order to prevent any conflict of interest situations. In the SCA, this control extends to the supervisory board. Traditionally, a distinction is made between "regulated agreements," prohibited agreements, and free agreements.

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Regulated, prohibited, or free conventions

As in joint stock companies, the significant freedom of action granted to management bodies is counterbalanced by the control of agreements concluded with the company, in order to prevent any conflict of interest situations. In the SCA, this control extends to the supervisory board. Traditionally, a distinction is made between "regulated agreements," prohibited agreements, and free agreements.

In accordance with Article L. 226-10 of the Commercial Code, agreements entered into directly or through an intermediary between the company and one of its managers, a member of its supervisory board, a shareholder holding more than 10% of the voting rights, or, if it is a shareholder company, the company that controls it within the meaning of Article L. 233-3 of the same code, are subject to the regulated agreements procedure . The same applies to agreements in which one of these persons is indirectly interested. Finally, the regulated agreements procedure applies to agreements between a company and an undertaking if one of the company's managers or members of the supervisory board is an owner, partner with unlimited liability, manager, director, chief executive officer, member of the management board, or member of the supervisory board of the undertaking.

The authorization of these agreements is granted by the supervisory board.

On pain of invalidity of the contract, managers other than legal entities are prohibited from contracting, in any form, loans from the company, obtaining an overdraft from it, in a current account or otherwise, as well as having their commitments to third parties guaranteed or endorsed by it . If the company operates a banking or financial establishment, this prohibition does not apply to the ordinary operations of this business concluded under normal conditions . A temporary advance of a modest amount made to a legal entity manager is not subject to the prohibition as it only concerns natural persons .

Apart from the invalidity of the contracted agreements, managers are subject to civil and criminal sanctions. On the criminal level, a manager of an SCA can be prosecuted for misuse of company assets. Indeed, the act of using the company's assets or credit in bad faith, contrary to the company's interest, for personal purposes or to favor another company or undertaking in which the person has a direct or indirect interest, is punishable by five years of imprisonment and a fine of 375,000 euros .

The free agreements, referred to in Article L. 225-39 of the Commercial Code, concern routine transactions concluded under normal conditions. Routine transactions are those of the same nature as others already carried out by the company and falling within its statutory activity. Such transactions, when concluded under normal conditions, are not subject to the approval of the supervisory board. This is the case for the agreement between the SCA and its general partner and manager, which delegates to the latter services covering accounting, portfolio accounting management, financial management, and relations with shareholders and investors based on actual cost billing .

See Articles L. 225-38 to L. 225-43, L. 22-10-12, and L. 22-10-13, Commercial Code - See for an application, Grenoble, 6 January 2011, LawLex202200006984JBJ, holding that a current account agreement is not subject to prior authorization by the supervisory board when it is concluded between an SCA and a limited partner shareholder who is not a member of the company's supervisory board and does not hold more than 10% of the voting rights.

Commercial Code, Art. L. 225-43, para. 1, by reference to Art. L. 226-10, para. 1.

Commercial Code, Art. L. 225-43, para. 2, by reference to Art. L. 226-10, para. 1.

CA Grenoble, 6 January 2011, LawLex202200006984JBJ, previously cited.

Cass. com., 11 October 2023, LawLex202300012323JBJ, D. 2023, 2114, obs. BARBIERI, approving on this point Paris, 16 September 2021, LawLex202300004818JBJ.

Company Law (en cours)

557. Regulated, prohibited, or free conventions

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557. Regulated, prohibited, or free conventions

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

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